Understanding Capacity Utilisation

What does capacity utilisation refer to in a business?

• Capacity utilisation measures customer satisfaction levels.

• Capacity utilisation is the number of employees in a business.

• Capacity utilisation measures the extent to which a business uses its production capacity.

• Capacity utilisation refers to the total profit a business makes.

If a company is operating at 75% capacity utilisation, what does it mean?

• The company is using 75% of its production capacity.

• The company is using 25% of its production capacity.

• The company is producing 75% more than its capacity.

• The company is operating at full capacity.

Which of the following is a benefit of operating at full capacity utilisation?

• Lower average costs per unit.

• Higher average costs per unit.

• Increased production time per unit.

• Reduced workforce efficiency.

What is one potential disadvantage of operating at 100% capacity utilisation?

• Lower production costs due to efficiency gains.

• Improved employee morale and job satisfaction.

• Increased flexibility in responding to market changes.

• Increased risk of equipment failure and maintenance issues.

How can a business increase its capacity utilisation?

• Reduce the number of employees to cut costs.

• Optimize production processes and improve workforce efficiency.

• Limit production to focus on quality over quantity.

• Increase product prices to boost revenue.

What factors can affect a company's capacity utilisation?

• Product design

• Demand, resources, efficiency, maintenance, workforce skills, economic conditions

• Marketing strategies

• Customer feedback

Why is it important for businesses to monitor capacity utilisation?

• It is important for businesses to monitor capacity utilisation to optimize resource use, reduce costs, and improve operational efficiency.

• To maintain a fixed number of resources regardless of demand.

• To ensure all employees are working overtime regularly.

• To increase production speed without regard to costs.

What is the relationship between capacity utilisation and production costs?

• Capacity utilisation has no effect on production costs.

• Higher capacity utilisation increases production costs.

• Lower capacity utilisation decreases production costs.

• Higher capacity utilisation generally reduces production costs.

How does capacity utilisation impact employee workload?

• High capacity utilisation decreases employee workload.

• Low capacity utilisation has no effect on employee workload.

• High capacity utilisation increases employee workload, while low capacity utilisation decreases it.

• Employee workload is unaffected by changes in capacity utilisation.

What strategies can a company implement to manage excess capacity?

• Increase production costs

• Reduce workforce size

• Optimize production schedules, diversify product lines, increase marketing efforts, outsource production, and explore partnerships.

• Limit product availability